April is Autism awareness month; these types of campaigns are important because they remind us of the many families whom struggle financially to take care of disabled loved ones. One government program that can help is a Registered Disability Savings Plan (RDSP).

A RDSP is a registered savings plan, like an RRSP; but it is intended to help parents and families to save for the long-term financial security of persons with severe or prolonged disabilities. In order to qualify for government grants the person who is disabled must be eligible for the Disability Tax Credit, and be 49yrs or younger.

When the beneficiary is a minor, the parents or legal guardian can set up an RDSP and remain holders of the plan until the beneficiary turns 18 years of age. If the beneficiary is over 18yrs and legally competent to manage property, then he/she must be the holder of the plan. Although there can be more than one holder of the plan (both parents) there can only be one beneficiary per plan, and there can be only one RDSP per beneficiary.

Anyone can contribute to a RDSP and you can contribute up to $200,000 per beneficiary during the lifetime of the plan. There is no annual contribution limit, so a parent or grandparent can bequest a lump sum into a RDSP for a disabled child. Although the contributions are not tax deductable; the plan holder will receive government grants for opening and investing into a RDSP, these can be quite substantial.

An RDSP can receive a maximum of $3500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. The amount of the grant received is based on the beneficiary’s family income and are available until December 31st of the year in which the beneficiary turns 49 years old.

Canada Disability Savings Grant (CDSG)

  • Maximum annual CDSG = $3,500 for family income less than $91,831
  • Maximum annual CDSG = $1,000 for family income over $91,831

The Canada Disability Savings Bond (CDSB)

A Canada disability savings bond is an amount paid by the government of Canada directly into an RDSP. The government will pay bonds of up to $1000 a year to low-income Canadian with disabilities. No contributions are required to receive the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old. The amount of the bond received is again based on the beneficiary’s family income.

  • Maximum annual CDSB = $1,000 for family income below $30,000
  • Smaller amounts of CDSB for family income between $30,000 and $45,916

Family income is based on:

  • Where the beneficiary is a minor, the family’s net income
  • Where the beneficiary is an adult, the beneficiary’s net income (and spouse, if applicable)
  • The beneficiary family income thresholds are indexed each year to inflation.

Beginning in 2011 unused grant and bond entitlements can be carried forward for a maximum of 10 years (starting in 2008).

If within 10 years any of the following events occur, the government bonds and grants must be repaid to the government of Canada:

  • The RDSP is terminated (voluntary closure)
  • The plan is deregistered
  • A disability assistance payment is made from the plan (money is redeemed)
  • The beneficiary ceases to be eligible for the disability tax credit
  • The beneficiary dies

If you want more information or have any questions, please don’t hesitate to give me a call.

Have a great weekend,

Tracey

 

 

Source: CRA Website, Mackenzie Financial website, MT 10-26-2011